Post: Smart 4CP management and automation

Smart 4CP management and automation

When it comes to energy, value is determined by three key factors: price and quantity and time. When and how you use energy is just as important as the price you pay for it and how much you use.

Over the last five years, transmission charges in ERCOT have increased more than 50%, with further rises on the horizon. But a Coincident Peak (4CP) management strategy may help reduce your costs. Businesses that can strategically lower their demand during system peaks can drastically reduce their transmission charges and make significant savings on final costs per MW.

What is 4CP?

Across almost all of Texas, operators are subject to an unpredictable fee for using electricity during peak times. Unlike normal peak periods, 4CP days are not only notoriously difficult to predict – they also have implications for the next 12 months of electricity bills starting in January of the following year.

The 4CP concept is simple. When an industrial or commercial operation uses electricity, it doesn’t pay a flat rate. It pays very different prices based on when it’s operating. This price variation reflects real-time conditions on the grid. In a de-regulated market (which Texas is, of course), high demand or low supply means high prices. This can take several forms. Here we focus on, or as it’s known in Texas as, 4CP.

Each month, from June through September, utilities measure each customer site’s usage during the hottest few minutes of the highest demand levels of each month. It then uses those readings to calculate a separate fee worth about 1/3^rd of your total utility bill. This fee reflects real-time grid conditions, with high demand leading to high prices in a free market like Texas. Utilities measure each site’s usage during the hottest 15-minute interval of each summer month from June through September and use this data to calculate a tariff.  If you were using power during that 15-minute interval you will get charged. If you were curtailing during that 15-minute interval, you will get a huge reduction in your utility bill.  Those savings, or charges, are reflected through the following 12 months of bills starting the following January.

The concept is simple: reduce peak load on the grid. That helps avoid blackouts, which is worth big money. But the reality of dealing with 4CP is complex.

With no certainty of when the hottest day of the month will be, businesses are left with limited options, such as accepting the high tariff as a cost of doing business or guessing when the peaks will occur and reducing demand pre-emptively. Both options come with significant costs and risks and rely heavily on how easy it is to predict the weather, and demand, from day to day.

The first option is easy but costly. Many companies still operate this way, but doing nothing is becoming an untenable strategy as depending on where you are located within Texas, the value of avoiding this tariff is worth anywhere from $65K to $110K per megawatt. The second option requires a little more vigilance. Readily available data from ERCOT, shows real-time grid conditions which can forecast a coming peak. Operators can then choose to shut down or shift demand – but this is error-prone, and can be costly, and cause more interruptions to your business operation than you have an appetite for.

Smart 4CP management and automation

A better solution is AI 4CP management and automation. Using a data-driven approach that combines earlier peak predictions, historical load and intelligent analytics, customized alerts, and load control automation, GridBeyond provides our clients with the most sophisticated advanced predictions of a 4CP event well in advance. Users can then prepare ahead of time to safely reduce demand and coordinate production comfortably and with a high degree of confidence. Our AI-powered platform also uses historical data (over 80 different data points) to confidently shed loads during peak events, set alert thresholds tailored to their individual risk tolerance and revenue expectations, and automate load-shedding sequences to save time and reduce the need for staff to be on-site.

With the right tools, businesses can manage the 4CP tariff and demand management effectively, reducing costs and avoiding grid emergencies. By connecting energy and production data in a predictive way, businesses can take a significant chunk out of their utility bills while minimizing downtime.

Peak price avoidance

Another related practice involves setting custom rules for shutting down certain processes based on specific price signals from the grid. This method does not aim to forecast grid peaks, but the outcome is similar. For example, if real-time grid prices exceed $150/MWh (or a present price point you choose), operators may decide to shut down part of their operation, and if they exceed $200/MWh, cascade to another part of their operation. Depending on the operation, a complete shutdown may be desired at some point, and these thresholds can be adjusted daily based on various factors you select. Prices in ERCOT are known to infrequently rise to 4 figures up to a cap of $4500/MWh.

This strategy does not inherently predict and respond to Coincident Peak signals, but because grid prices typically rise in tandem during those periods, the operation is likely to be curtailed already when the peak occurs. In addition, this approach provides significant year-round cost savings, even outside of peak summer months as these price spikes can occur during winter months just as well. With a high level of load flexibility, many operations can save tens of thousands of dollars a month or more with minimal disruption.

With our automated capabilities to provide even greater accuracy of performance, and greater monetized earning, we give you the option to curtail manually or automatically, depending on your preference.

At GridBeyond our market analysts assess the probability of a grid system peak every day. Our platform can predict peaks and prices with up to 48 hours advanced notice with 90%+ accuracy giving you the needed time to schedule your operations accordingly. If the probability is high, we notify you, but more crucially, we are able to act on your behalf, automating the entire process and giving you the competitive advantage to add significant revenues to your bottom line.

Let GridBeyond’s AI platform give you the competitive advantage to monetize the grid’s need increase reliability while helping you reduce your energy spend this Summer.

Your 4CP management strategy

Over the last five years, transmission charges in ERCOT have increased more than 50%, with further rises on the horizon. But, a 4CP management strategy may be the trick to maximizing your use of renewable energy and reducing your costs during the hottest time of the year.

Learn more